2016 (11) TMI 805 - SC - Income Tax

Reopening of assessment - bad debts written off - Held that - The assessee has disclosed that the bad debts were transferred to Kotak Mahindra Bank Ltd. for realization, the authority recording the reasons prior to issuance of notice under section 148 of the Income-tax Act, 1961 has specifically recorded that there was no material available on record to indicate that the bad debts have been written off as mandatorily required under section 36(1)(vii) of the Income-tax Act, 1961 as amended with effect from April 1, 1989. If that be so, we find no fault with the notice issued. Consequently, we allow this appeal by setting aside the order of the High Court and dismissing the writ petition filed by the respondent-assessee challenging the said notice. As we have expressed no opinion on the merits of the reassessment, which has been made on December 24, 2010, and it will be open for the respondent-assessee to urge all questions as may be open, in law, in the event the assessee seeks to challenge the reassessment order dated December 24, 2010.

Summary

Issues:
Challenge to the order of the High Court regarding reopening of assessment under section 148 of the Income-tax Act, 1961.

Analysis:
The Supreme Court, comprising Justices Ranjan Gogoi and Prafulla C. Pant, addressed the challenge brought by the Revenue against the High Court's order dated February 22, 2011, in Writ Petition (LOD) No. 140 of 2011. The issue at hand pertained to the reopening of the assessment of the respondent-assessee, Sumitomo Mitsui Banking Corporation, through a notice issued under section 148 of the Income-tax Act, 1961. Upon reviewing the High Court's order and the reasons recorded for the reassessment, the Court noted that the authority responsible for the reassessment had specifically mentioned the absence of material indicating the mandatory write-off of bad debts as required under section 36(1)(vii) of the Income-tax Act, 1961. In light of this, the Court found no fault with the notice issued for reassessment and consequently allowed the appeal, setting aside the High Court's order and dismissing the writ petition filed by the respondent-assessee challenging the notice.

Furthermore, the Court clarified that while they upheld the notice for reassessment, they refrained from expressing any opinion on the merits of the reassessment made on December 24, 2010. The respondent-assessee was granted the opportunity to raise all legal questions available if they decide to challenge the reassessment order dated December 24, 2010. This ruling ensures that the respondent-assessee retains the right to contest the reassessment on legal grounds, even though the notice for reassessment was deemed valid by the Supreme Court.